Scott Pilutik

I am an attorney and consultant living and working in Manhattan, focusing primarily on church/state constitutional law. I'm a recognized expert on the Church of Scientology organization. I also have strong interests in intellectual property law where it intersects with emerging media, and free speech.

The NHL Lockout and Heroin Economics

Having survived NHL lockouts in the past (my third under Bettman alone! Plus one strike!) I can rationalize my chances of getting through this one like a seasoned junkie assuring himself that while there’s no heroin at the moment, it’ll be available again come Thanksgiving. Or Christmas. Or not for another year!, which seems to be the vibe at present. But rationalizing only gets you so far when the crucial question of when is so unknown. I’m getting jangly now, despite my head scolding me to pace my outrage.

It’s a cruel twist that the alternative to watching NHL hockey during a lockout is reading about labor negotiations, as if drinking arsenic is the only choice when there’s no ice cream left. But drink I have, and it tastes about as bad as you’d think.

From the outset–while the 2011-12 season was winding down even–the smart people were predicting a lockout to begin this season. What they didn’t predict was that the NHL owners’ opening proposal to rewrite the CBA would be a million miles from the status quo. In any negotiation to rewrite an existing agreement, if the first offer is too far from the predictable center “sweet spot,” the opposing side has no choice but to counter with terms generally equidistant from the center, unless the opposing side is desperate and without leverage.

If a friend offers to sell you her 2004 Honda Civic for $100,000 your counteroffer should be $10. Or, you know, just walk away from the table and wait for a serious offer. Applying this analogy to hockey, the owners need to get rid of the car and the players need to buy it–but for us fans, that Civic is our only ride. And so we wait on the side of the road for the the parties to agree on a price.

Heroin? Ice cream? Honda Civics? What does any of this have to do with hockey? Exactly. This is where we are. There is endless time for digression.

In case it isn’t entirely obvious, my sympathies lie entirely with the players, and not because of the owners’ negotiating tactics, necessarily, but rather the owners’ bad faith. Since the last lockout ending in 2005, revenues are up, salaries are up, attendance is up. The NHL closed a mega-TV deal with NBC, which coincided with NBC’s buying out the Versus Network (nee Outdoor Life Network) and renaming it NBC Sports. But teams are still “losing money,” we’re’ told, and the cure, per Gary Bettman, requires the players to accept a lower percentage of the contracts they’ve already negotiated.

Let me say here that I believe NHL teams only “lose money” in the same sense that every film in the history of motion pictures has “lost money, per the studios.” If your business has hundreds of employees, subcontractors, vendors, etc., it’s easy lifting for your accountant to ensure that you at least appear to be “losing money.” And because the owners’ books aren’t exactly wide open (e.g., arena concessions revenue isn’t included in the CBA definition of “hockey related revenue”), claims of poverty by the owners ring hollow.

What’s more interesting to me is that we’ve encountered the “It’s our mistake, but you’ve gotta subsidize it” line of reasoning before, and not even that long ago. When Wall Street needed a bailout in 2008 after grossly failing to manage risk (its only job), said bailout was for a hundred cents on the dollar and it was on the taxpayers’ backs.

Like Wall Street, the NHL owners evidently believe that the system–here, the NHL–owes them. That their bad business decisions can and should be subsidized by everyone else. That every six years the owners get to renegotiate contracts they’ve already signed. Profits are privatized, losses socialized. In a narrow sense this view makes some sense–teams can only economically thrive in the context of a league.

If only it were the league that the owners were looking to impose their losses upon instead of the players. If you’re able to borrow enough money to join the NHL owners club, you’re evidently infallible and beyond consequence.

The owners, if polled, would each likely describe themselves as believers in the free market, but would also likely fail to see the contradiction in asking that the players bear the cost of their poor decisionmaking. Indeed, it’s more likely that the owners view themselves in a heroic, Ayn-Randian light, or as Red Wings VP Jim Delevanno put it (in defense of the owners, in case that’s not clear):

The owners can basically be viewed as the Ranch, and the players, and me included, are the cattle. The owners own the Ranch and allow the players to eat there. That’s the way its always been and that the way it will be forever.

The NHL wasted no time fining Delevanno a quarter million for having the unseemliness to say what every owner steadfastly believes. It’s also eerily reminiscent of Mitt Romney’s crude explanation of the United States’ 53/47 management/parasite population split. Evidently no one told either Delevanno or Romney that the first rule of Fight Club is to never talk about Fight Club.

I’m not suggesting that the league should be run on untethered free market principles–it can’t. A sports league is by nature a joint-venture collective, and as such quite a bit of “socialism” is necessary for the league to work as a league. And like or hate Gary Bettman, he’s done an admirable job of improving the league’s overall financial situation, especially given the low bar set by his inept predecessors, and even despite the mixed results of Bettman’s southern-state expansion strategy.

It’s also difficult to sympathize with the NHL owners simultaneously crying poverty while flushing away what revenues are due to disappear with another lost season, but I suppose the accountants can be called on to prove that North is actually South, as well. Ultimately, the only price the NHL owners will pay for depriving fans of hockey is an economic calculus only they’re aware of–as Gary Bettman previously (and loathsomely) pandered: the fans will come back no matter what. It’s sad that he’s right. After all, we just want our heroin, and off-brand KHL, AHL, ECHL heroin just won’t do.